Correlation Between SPASX Dividend and Sensen Networks

Can any of the company-specific risk be diversified away by investing in both SPASX Dividend and Sensen Networks at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SPASX Dividend and Sensen Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPASX Dividend Opportunities and Sensen Networks, you can compare the effects of market volatilities on SPASX Dividend and Sensen Networks and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SPASX Dividend with a short position of Sensen Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPASX Dividend and Sensen Networks.

Diversification Opportunities for SPASX Dividend and Sensen Networks

-0.06

Correlation Coefficient

SPASX Dividend  Sensen Networks

Good diversification

The 3 months correlation between SPASX and Sensen is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding SPASX Dividend Opportunities and Sensen Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensen Networks and SPASX Dividend is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SPASX Dividend Opportunities are associated (or correlated) with Sensen Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensen Networks has no effect on the direction of SPASX Dividend i.e., SPASX Dividend and Sensen Networks go up and down completely randomly.

Pair Corralation between SPASX Dividend and Sensen Networks

Assuming the 90 days trading horizon SPASX Dividend Opportunities is expected to generate 0.14 times more return on investment than Sensen Networks. However, SPASX Dividend Opportunities is 7.22 times less risky than Sensen Networks. It trades about -0.01 of its potential returns per unit of risk. Sensen Networks is currently generating about -0.04 per unit of risk. If you would invest  166,590  in SPASX Dividend Opportunities on September 25, 2024 and sell it today you would lose (820.00) from holding SPASX Dividend Opportunities or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SPASX Dividend Opportunities  vs.  Sensen Networks

Pair Trading with SPASX Dividend and Sensen Networks

The main advantage of trading using opposite SPASX Dividend and Sensen Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPASX Dividend position performs unexpectedly, Sensen Networks can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sensen Networks will offset losses from the drop in Sensen Networks' long position.

The idea behind SPASX Dividend Opportunities and Sensen Networks pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.